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ECONOMIC ESPIONAGE ACTof 1996 It is a federal crime to steal trade secrets • For the benefit of a foreign government (Economic Espionage, 18 U.S.C. 1831) or • For the benefit for anyone other than the owner of the trade secret (Commercial Theft of Trade Secrets, 18 U.S.C. 1832 et seq.) Reflects growing corporate value of intellectual assets and focus on international IP enforcement New DOJ Intellectual Property Task Force 31

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Prohibited Conduct• Under 18 U.S.C. § 1832 et seq., it is a crime to 1. CONVERT A TRADE SECRET relating to a product produced for or placed in interstate or foreign commerce 2. with CRIMINAL INTENT 3. for the ECONOMIC BENEFIT of someone other than the owner of the trade secret 4. or to ATTEMPT OR CONSPIRE to do so• Government must prove each element beyond a reasonable doubt• The statute of limitations32is five years

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Penalties• Fines • $250,000 - individual • $5,000,000 - corporation • $15,000,000 – if for the benefit of foreign government• Imprisonment in federal custody • Maximum 10 years • Maximum 15 years – if for the benefit of foreign government• Forfeiture of any property used in or proceeds derived from the theft 33

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ECONOMIC ESPIONAGE ACT AND TRADE SECRETS FOREIGN INVESTMENTS IN THE UNITED STATES 34

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Committee on Foreign Investment in the United States (“CFIUS”)• Initially Formed in 1975 by Executive Order 11858 (May 7, 1975) • Motivated by increasing concerns about OPEC investments in U.S. Companies • Reviewed investments in the US that might have major implications for U.S. ―National Interests‖• 1993 Byrd Amendment required CFIUS to investigate all transactions where acquirer is controlled by or acting on behalf of a foreign government• Foreign Investment and National Security Act of 2007 (―FINSA‖) • Motivated by political and popular uproar over two proposed transactions: • 2005 China National Offshore Oil Corporation’s (―CNOOC‖) proposed purchase of Unocal, and • 2006 Dubai Ports’ proposed acquisition of Peninsular & Oriental Steam Navigation Company. 35

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Committee on Foreign Investment in the United States• Policy Goals: National Security v. Foreign Investment • To ensure national security while promoting foreign investment. Executive Order 13456 (January 23, 2008)• CFIUS reviews transactions by or with any foreign person, if the transaction could result in control of U.S. business by a foreign person • But only where national security is implicated 36

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CFIUS Covered Transactions• Merger• Acquisition• Credit agreement• Lease• Any transaction that results or could result in foreign ―control‖ of any U.S. business, part of a U.S. business, or U.S. assets by a foreign person, including, but not limited to: • Investment • Joint Venture • Asset Purchase • Includes transactions when foreign persons convey U.S. business or assets to another foreign person. (§ 721(a)(3); 31 C.F.R. § 800.207, 800.301) 38

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CFIUS Covered Transactions• NOT ―Covered Transactions‖ • Stock splits (if it does not result in a change in control) • Pro rata stock dividend (if it does not result in achange of control) • Transactions resulting in foreign person holding 10% or less of a U.S. owned business and if only for investment purposes – Objective test – Narrowly construed – Look at any rights to directorship, voting rights agreements and comparable factors • Acquisition of part of an entity (or asset) that does not constitute a U.S. business • Acquisition of securities by a securities underwriter in the ―ordinary course‖ of business • Acquisition pursuant to insurance contract if made in the ‖ordinary course‖ of business 39

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What is the FCPA?Anti-bribery provision: Prohibits corrupt payments to foreign government officials for the purpose of obtaining or retaining business 反贿赂：将出于影响官方决定以获得商业利益之目的而向世界仸何地方的外国官 员行赂的行为认定为犯罪Accounting provision: Requires companies with publicly traded stock in the US (registered with the SEC) to meet certain record keeping and internal control standards 会计：要求在美国公开发行股票（在美国证券交易委员会注册）的公司符合特定 记录保存和内控标准• The FCPA applies to US companies and their overseas employees and agents• It is extremely broad and harsh; in recent years it has become a major concern for US companies operating overseas, especially in China美国反海外腐败法是一项适用于美国境外公司及雇员的美国法律美国反海外腐败法禁止贿赂外国政府官员的行为美国反海外腐败法涉及的面极广且十分严格，在最近五至七年中成为在海外经营–尤其在中国经 营的美国（及其它）公司的重大法律问题 57

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Notable FCPA Penalties• ABB reserved $850 million for a • Siemens paid $1.6 billion in fines to resolution of U.S. and European U.S. and German enforcement corruption charges in the first authorities in December 2008. quarter of 2010. • AB Volvo paid $19.6 million for• General Electric paid $23.4 million, violations discovered during the including $18 million of disgorged U.N. Oil for Food Programme profits, in July 2010. investigation in March 2008.• Daimler AG paid $91 million in • Chevron paid $30 million in disgorged profits in March 2010. disgorgement and penalties for U.N. Oil for Food Programme• BAE pleaded guilty to making false violations in November 2007. statements about its FCPA compliance program and paid a • Baker Hughes paid more than $44 $400 million criminal fine in million in April 2007. February 2010.• Halliburton and its subsidiary, Kellogg Brown & Root, paid $579 million in penalties for violations of the FCPA in February 2009. 59

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Some FCPA Principles• In addition to bribes, the law also prohibits corruptly offering any benefit or thing of ―value‖ directly or indirectly to a government official• Employees of state-owned enterprises and relatives of government officials may be ―government officials‖ under the FCPA• There is no de minimis exception• It is unlikely that the payments can be justified as ―facilitating‖ payments• No bribery is permitted under PRC law, which is more strict than US law• It is useless to argue that PRC anti-bribery laws are not consistently enforced, or ―it is necessary to do business‖ or ―everyone does it‖• If you know of the violation but were not involved, you may still be liable• If you did not know of the violation but should have known or ignored warning signs, you may still be liable• 美国反海外腐败法不但禁止向政府官员行贿，而且禁止向其提供的仸何利益或具有价值的物 品• 该法案不存在“小额礼品”的抗辩• 政府官员包括国有企业的雇员• 不存在真正的例外或抗辩理由 • 很难证明大多数付款出于“便利”或“促迚”之目的 • 中国本地法律禁止贿赂–其实中国法律比美国法律更严格 • 中国反贿赂法内部不一致或未被严格执行的事实并不重要 • “大家都这么做”的事实并不重要 60

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FCPA Books And Records Principles• Payments not properly recorded in the Company’s books and records may be a FCPA record-keeping violation even where there is insufficient proof of bribery 如果您应当知情或对警告–―警示标示”置之不理，即便不知情也不能免除您的法律责 仸 帐外交易和现金交易本身就很可疑 即使执法机构不能证明贿赂，他们通常能证明付款未在公司会计帐簿和记录中妥善记 载，而该行为也构成违法• Accounting violations are easier for the government to prove so beware of • Cash transactions • Off-books accounts and ledgers • Fake receipts • False or unsubstantiated expenses or cash advances• 切记，政府更易证明会计（“帐簿及记录”）及内部控制方面的违法行为 • 现金交易 • 帐外帐目及分类帐 • 假收据 • 虚假或无证明的费用或预支现金 61

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More FCPA Books And Records Principles• Companies can acquire FCPA problems in M&A transactions  Careful due diligence is essential in any acquisition  Important to carefully structure and document M&A transactions• 您还可能在并购交易中涉及美国反海外腐败法的问题  有必要在仸何收购活动中迚行细致的尽职调查  在交易架构及文件记录中采取保护措施可能有所裨益，但其保护程度有限 When in doubt, consult immediately with Company counsel 62

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CHINESE STATE SECRET LAWS• Secrets belonging to Chinese Government and state-owned enterprises ("SOEs"): the Law of the Peoples Republic of China on Guarding State Secrets includes provisions restricting the export of electronic data and the use of computers and internet.• The state secrets law is as vague as it is broad: • It provides that state secrets are ―matters that have a vital bearing on state security and national interests and, as determined according to statutory procedures, are known by people within a certain scope for a given period of time.‖ • It also includes a broad, catch-all category covering "other secret matters of the state which shall be kept confidential as determined by state departments for the maintenance of secrets.‖• Chinese enforcement authorities have almost unlimited discretion to define what information may constitute a state secret: • An American geologist, Xue Feng, was prosecuted for purchasing data regarding Chinese oil wells under a commercial contract • At a time when such information had not yet been classified as secret.• Many clients in China have dealings with the government or with SOEs. 66

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Preventive MaintenanceCRIMINAL CIVIL• At best, white-collar • At best, regulatory or civil criminal prosecution litigation will be extremely destroys reputation costly to the company• At worst, it is corporation’s • At worst, regulatory or civil death sentence, with prison litigation can destroy a terms for responsible company. corporate criminals 68

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Suggested Measures to Prevent Corporate Liability• Well drafted business agreement• Work closely with U.S. counsel to stay compliant of existing laws/regulations and keep abreast of proposed legislation and new development• Effective IP management • Chinese companies are beginning to understand and appreciate the importance of IP protection • Can be used as an offensive weapon or leverage in settlement discussions• Importance of insurance coverage 70

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Litigation Approach• Fact: 95% of cases settle before trial (IP cases, very few go to trial)• This forces litigants to ask: • What is my goal in the litigation? • How do I position the case for optimal settlement? • Which mediation/ADR mechanism best achieves my goal? • How can I shape the process to be as cost effective as possible 71